Oil Prices Move Higher On Interest Rate Cut

The Federal Reserve cut interest rates by a half a point last week, which was a little larger than some economists had expected.  With that reduction, oil prices moved higher in trade, spending much of the past week in the mid $70 per barrel range.  Patrick DeHaan with Gasbuddy.com mentioned last week that there was concern that if the fed cut interest rates by a half a point, that would be a sign that the U.S. economy was not as healthy as once thought.

“At least for now, the concerns about the larger than expected rate cut were tempered by Jerome Powell's comments last week," DeHaan said.  "I think he really spelled it out very clearly that the larger than expected cut, not necessarily due to a slowdown in the economy or at least not concerning enough at this point yet. And that's really why. The stock market and why oil prices didn't really plummet more. I think he was able to assure the market that everything looks to be in order in this case, at least for now.”

So, how long does DeHaan expect oil prices to inch higher?  Not long, comparing this recent uptick to a sugar high that won’t stand the test of time.

“I don't know that it's a trend that will continue, but we'll have to keep it on the Middle East. I mentioned that the Middle East certainly can be a wild card and what happens there," DeHaan added.  "So, I don't know if I don't, I'm not led to believe that the oil price rally will be drawn out and sustained.  We'll have to see if the market can maintain these elevated levels.  But again we have another area of disturbance in the Gulf that could make its way towards the US here later this week. So a lot of different wild. I don't think oil prices are going to retest the sub $70 barrel mark. We can head somewhere into the mid $70s for now, but that shouldn't impact gasoline prices much simply because gasoline demand last week was rather sluggish on gas. But the data showing that US gasoline demand last week fell by over 2%.” 

DeHaan noted that kind of gasoline demand is typical for this time of year, as we transition into fall.  But unfortunately, diesel prices typically increase this time of year, not only because of harvest and implement movements, but many Americans stocking up on heating oil for the coming winter.

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